Exclusive: Poland's Alior keen to buy Bank BPH from GE - sources

WARSAW (Reuters) - Poland's mid-tier lender Alior Bank ALRR.WA, owned by state-run insurer PZU, is in talks to buy its rival Bank BPH BPHP.WA from General Electric GE.N and hopes to complete a deal around mid-2016, three banking sources told Reuters.

The logo of Poland's Bank BPH, owned by General Electric (GE), is seen on their headquarters in Warsaw, Poland August 25, 2015. REUTERS/Kacper Pempel

If the purchase from the U.S. group is successful, it would bolster the broader agenda of the ruling Law and Justice (PiS) party, which aims to regain more control over a banking sector that is 60 percent foreign-owned.

Government officials have signaled that PZU PZU.WA, central Europe's biggest insurance company, should buy more banks as part of this plan.

“Alior plans the bank acquisition transaction during the second or third quarter. The plan assumes that Alior will conduct a rights issue to raise money both for the bank and to strengthen its own capital position,” a source familiar with the matter said.

GE’s 87 percent stake in Bank BPH has a market value of 2.2 billion zlotys ($550 million). The bank’s assets are worth roughly 32 billion zlotys, or 2 percent of the sector’s total.

GE has said it is selling BPH as part of a strategic shift away from the financial sector but declined to comment on Monday. Alior also declined comment.

Another source, who also spoke on condition of anonymity, confirmed the talks. “Alior is interested in taking over BPH. The transaction could be done in the second part of the year. It is not possible now to talk about the price, because there are still some things that are unknown,” the source said, without elaborating.

A further source said a rights issue was being considered, but there was also an alternative. “A rights issue is one of the two options that are on the table,” the source said.

The other was that PZU purchases BPH shares directly from GE, after which Alior would buy them back from PZU, the source said, adding: “There is no decision yet.”

PZU said last year it would be able to raise roughly 8 billion zlotys, enough for further purchases as well.

A fourth source, an investment banker, said that Alior was in talks aimed at taking over BPH. A sale of BPH would mean GE leaving Polish banking entirely.

After years of robust growth, Poland’s banking sector faces increasing pressure from record low interest rates and government plans to raise welfare spending at the expense of big corporations, including banks. This pressure has led banks to planning job cuts.

Austria’s Raiffeisen bank is also seeking buyers for its Polish unit. Two years ago, Nordic banking group Nordea sold its local subsidiary to Poland’s largest bank, state-owned PKO BP.

The conservative government led by PiS has already imposed a 0.44 percent tax on banking assets and is planning legislation to force banks to re-denominate Swiss franc mortgages for borrowers who want zloty loans.

Listed Polish banks lost almost a quarter of their total market value last year, largely because of economic policy concerns.

Rising costs mean that mid-tier lenders are hoping to bolster their position through purchases of smaller firms.

PZU had been in talks over BPH last year but the deal fell through over the cost. However, analysts say the government’s blessing for the insurer to buy more banks may mean it would be willing to pay a higher price for BPH.

Additional reporting by Adrian Krajewski; editing by Justyna Pawlak, Marcin Goettig and David Stamp